Priority of secured debt prevails over Income Tax attachment; sale certificates cannot be refused for registration.

A secured creditor's prior mortgage took precedence over a later Income Tax attachment, because crown debts may rank ahead of unsecured debts but not ahead of secured debts absent express statutory priority. Although the attachment under the Income-tax Act related back to service of notice in the certificate proceedings, that did not displace the earlier secured interest. In the absence of any provision in the Income-tax Act conferring priority over the secured creditor, the Registrar could not refuse to receive and file the sale certificates under the Registration Act. The operative position was that the tax department could not defeat prior secured debt by relying on attachment.

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Issues: Whether the Income Tax Department could claim priority over prior secured debts and rely on attachment to prevent registration of the sale certificates under the Registration Act.

Analysis: The properties had been mortgaged to the secured creditor long before the Income Tax attachment. The attachment under Section 222(1) of the Income-tax Act, 1961 was supported by the notice issued in the certificate proceedings, and Rule 51 of the Second Schedule provided that attachment relates back to the date of service of notice. Even so, the governing principle applied was that crown debts may prevail over unsecured debts, but not over secured debts, in the absence of an express statutory provision creating such priority. Since no provision in the Income-tax Act was shown to confer priority over the secured creditor, the Registrar was not justified in refusing to file the sale certificates under Section 89(4) of the Registration Act, 1908.

Conclusion: The Income Tax Department could not claim priority over the secured creditor, and the Registrar was bound to receive and file the sale certificates.

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